At the beginning of the COVID-19 pandemic we saw how CO2 emissions dropped as a result of worldwide lockdowns. The confinement measures stablished by governments stopped many industries like non-essential manufacturing and businesses, transportation, and tourism. Life as we knew it was on pause. Homes became the new offices and schools for many. This translated into a decrease in energy demand from services and industry -which explains the dropped in CO2 emissions- and was only partially offset by higher electricity residential use.
Electricity demand is often used as a predictor of economic growth or shrinkage; it can tell us how bad the economy is going to get and when it starts to recover. The COVID-19 pandemic has slashed energy demand, particularly in fossil fuels like oil and derivatives because planes are not flying as much, and cars are not driving as much either -at least in parts of the world where lockdowns are still in place. The demand has not recovered yet and experts predict that it will take a while to rebound to pre-COVID figures.
Prior to the COVID-19 pandemic, the largest drop in energy demand in the United States was in December 2001 after the 9/11 attacks combined with a mild winter depressed electricity demand. The current crisis, however, is like nothing we have ever seen before. It has major global implications, not only for public health but, for the global economy, energy consumption and CO2 emissions.
Although electricity security is essential for the continued functioning of supply chains and powering of healthcare facilities and equipment during the pandemic, the robustness and flexibility of the electric grid has been tested with sudden spikes and drops in demand. The incredibly low consumption has made market electricity prices reach below zero digits in some parts of the United States and countries like Germany, France, and the United Kingdom.
The International Energy Agency (IEA) recently published a report with the impacts of the COVID-19 crisis on global energy demand and CO2 emissions. In the report, the agency found that global energy demand declined by 3.8% in the first quarter of 2020 with the hardest impact felt on March. Additionally, it found that the impact of the crisis is dependent on the duration of lockdowns; countries in full lockdown have an average decline of 25% per week while the average decline for countries in partial lockdown is 18% per week.
The study also found that the impact of low energy demand has unequally affected different energy sources. The losers unequivocally are fossil fuels as well as nuclear; and the winners are renewables.
Coal was hit the hardest with its global demand falling by almost 8% compared to the first quarter of 2019. One reason for this is that China -which has a coal-based economy- was the hardest hit country in the first quarter of 2020, plus a combination of mild weather that was going to affect demand anyway. Oil also suffered with a decrease of nearly 5% mostly due to curtailment in worldwide transportation and aviation, which account for almost 60% of global oil demand. Natural gas had a moderate dip in demand at 2%; and nuclear also declined as power plants adjusted to lower demand especially in Europe and the United States.
Renewable energy demand, on the contrary, increased by about 1.5% during 2020’s first quarter. The reason why renewables have had an advantage during this unprecedented time is because they do not require a supply chain for their fuel inputs and receive priority in the grid, insulating them from lower demand in most cases.
Additional to the impact of lockdowns, the declines in energy demand this year also have another component which is a milder than average weather throughout most of the Northern Hemisphere.
IEA’s projections for the rest of the year do not give much hope for a recovery in energy demand. The report estimates that the demand could decline about 6%, which is more than seven times the impact of the 2008 financial crisis, reversing the growth on global energy demand achieved over the past five years. This is the largest drop in 70 years in percentage terms and the largest ever in absolute terms.
The silver lining is that according to IEA’s report, CO2 emissions are expected to decline by 8% or almost 2.6 gigatonnes. However, once the economy and demand for energy-related activities start to get back to pre-pandemic levels, the rebound may be larger than the decline, unless new investments are dedicated to cleaner energy.
Sources: IEA, OilPrice